Economy best in four years
Despite hit from housing and credit markets, economy grew at 4.9% rate in third quarter, matching forecasts.
By Chris Isidore, CNNMoney.com senior writer
November 29 2007: 8:39 AM EST
NEW YORK (CNNMoney.com) -- The nation's economy had its best gains in four years this summer and early fall, according to the government's latest reading released Thursday, as the problems in the credit and housing markets during the period couldn't derail growth elsewhere.
The gross domestic product, the broad measure of the nation's economic activity, grew at an annual rate of 4.9 percent in the three months ending Sept. 30. That's up from the 3.9 percent growth rate in the government's initial estimate for the period released a month earlier, as the revision matched the consensus forecast of economists surveyed by Briefing.com.
The downturn in housing shaved 1.03 percentage points off growth in the latest reading, while a slump in the auto sector also trimmed growth by 0.16 percentage point. Both estimates are close to the original readings. But new readings that showed stronger exports, spending by individuals and growth of business inventory lead to the large upward revision.
The growth was the best rate since the same period of 2003, and is the second best performance since early 2000, at the tail end of the 1990's technology boom. But most forecasts are for the economy to grow at a much slower pace in the last three months of this year, as well as in 2008. Last week the Federal Reserve revised its forecast for 2008 growth down to 1.8 to 2.5 percent from its previous estimate of a 2.5 to 2.75 percent gain.
That gloomier outlook going forward has economists and investors looking for the central bank to cut interest rates once again on Dec. 11, which would be its third consecutive cut.
The GDP report included some key inflation readings known as the price deflator, which measures all prices paid in the quarter, and the core PCE deflator, which measures prices paid by consumers, excluding volatile food and energy items.
The overall deflator posted a 0.9 percent annual increase, a slight uptick from the previous reading of a 0.8 percent gain. But the core PCE deflator again showed a 1.8 percent increase on an annual basis, unchanged from the earlier estimates.
Fed policymakers generally are seen wanting to see a core PCE increase of between 1 and 2 percent for inflation, so this latest reading would appear to be in their so-called "comfort zone.
Despite hit from housing and credit markets, economy grew at 4.9% rate in third quarter, matching forecasts.
By Chris Isidore, CNNMoney.com senior writer
November 29 2007: 8:39 AM EST
NEW YORK (CNNMoney.com) -- The nation's economy had its best gains in four years this summer and early fall, according to the government's latest reading released Thursday, as the problems in the credit and housing markets during the period couldn't derail growth elsewhere.
The gross domestic product, the broad measure of the nation's economic activity, grew at an annual rate of 4.9 percent in the three months ending Sept. 30. That's up from the 3.9 percent growth rate in the government's initial estimate for the period released a month earlier, as the revision matched the consensus forecast of economists surveyed by Briefing.com.
The downturn in housing shaved 1.03 percentage points off growth in the latest reading, while a slump in the auto sector also trimmed growth by 0.16 percentage point. Both estimates are close to the original readings. But new readings that showed stronger exports, spending by individuals and growth of business inventory lead to the large upward revision.
The growth was the best rate since the same period of 2003, and is the second best performance since early 2000, at the tail end of the 1990's technology boom. But most forecasts are for the economy to grow at a much slower pace in the last three months of this year, as well as in 2008. Last week the Federal Reserve revised its forecast for 2008 growth down to 1.8 to 2.5 percent from its previous estimate of a 2.5 to 2.75 percent gain.
That gloomier outlook going forward has economists and investors looking for the central bank to cut interest rates once again on Dec. 11, which would be its third consecutive cut.
The GDP report included some key inflation readings known as the price deflator, which measures all prices paid in the quarter, and the core PCE deflator, which measures prices paid by consumers, excluding volatile food and energy items.
The overall deflator posted a 0.9 percent annual increase, a slight uptick from the previous reading of a 0.8 percent gain. But the core PCE deflator again showed a 1.8 percent increase on an annual basis, unchanged from the earlier estimates.
Fed policymakers generally are seen wanting to see a core PCE increase of between 1 and 2 percent for inflation, so this latest reading would appear to be in their so-called "comfort zone.
